What does the latest data reveal about the pace of the energy transition? Is the 1.5-degree (DG) target still within reach? Or are the headwinds that have hit the share prices of green energy companies evidence of a slower transition? And, with 2030 regarded as a significant milestone year for many players and countries, what will the energy landscape look like when we get there?
These were some of the questions we addressed during our nine-session, nine-hour 2024 Energy Transition Marathon broadcast on 10 April.
In addition to presentations and updates from our own Rystad Energy thought leaders, we were fortunate to host prominent experts and leaders from the industry, sharing their insights and ambitions in driving their respective companies and industries forward. Although many have pointed to recent energy transition headwinds, numbers and data are telling us a different story. Hence, we are still optimistic that it is possible – albeit a momentous global undertaking – to deliver on the Paris Agreement. There are, however, huge ‘error bars’ on both the 2030 and 2050 outlooks, underscoring the many uncertainties and challenges that must be dealt with.
In pursuing the ambitious goals needed to reach net zero, there is no one-size-fits-all solution. To help companies and countries navigate the energy landscape and the energy transition, Rystad Energy has just released the first global database providing a bottom-up, sector-by-sector, country-by-country assessment of energy end-use. This database, with forecasts through to the end of this century, includes all scenarios from 1.5 to 2.3 DG and provides a detailed assessment of the likelihood of achieving these targets based on local starting points and maturation outlooks. The database also includes comprehensive studies of the supply chain’s ability to deliver.
What were some of the conclusions drawn during our 2024 Energy Transition Marathon?
Twenty-five core technologies will be driving the green transition forward, some more disruptively than others. Empirical evidence suggests that all these technologies are tracking towards the 1.5–1.9 DG range.
Solar PV continues to grow at a pace exceeding all expectations, with the supply chain over-delivering. This is truly a disruptive transformation.
Some of the key questions related to the high pace of growth and whether the geographical concentration of the supply chain represents excessive risk. We suggest that supply chains and access to critical materials and metals will not be a bottleneck in the quest for net zero.
Efforts to cut methane emissions represent an upside that could reduce global warming by as much as 0.2 DG. This amounts to low-hanging fruit that is now being prioritised through initiatives such as the COP28 methane pledge.
The electrification of global energy systems will continue and, in turn, the end-use sectors will see energy growth despite a decline in primary energy demand. This is attributable to a significant reduction in energy losses. Storage will play a very important role in the future energy system.
Meanwhile, energy prices – which have remained largely flat for the past 50 years – will finally start to decline. There are, however, significant uncertainties surrounding the forward trajectory, and more policy support will be needed.
Given all of these takeaways, what do we see next for oil and gas markets?
We now expect global oil consumption to reach a record high level of 105 million barrels per day (bpd) in 2024, with oil service segments running at full capacity to meet the call. This forecast can be assessed from divergent perspectives. On the one hand, the peak is lower than what was anticipated a few years ago and, in that respect, it is a positive signal in relation to global warming. On the other hand, however, the bullish oil market can be interpreted as an ill omen for meeting climate targets. Either way, current market sentiments are very positive for the global oil industry and economic returns are at record highs. But what lies in store for the remainder of this decade – continued growth or plateau and decline?
Let’s add some context to this discussion. Oil consumption in 2019 averaged 100.6 million bpd. If the pace of growth recorded from 2016 to 2019 had been maintained in the ensuing years, consumption in 2024 would have reached 108 million bpd. But that trajectory was derailed by COVID-19, which took down oil consumption by more than 11 billion barrels – or on average 6 million bpd for the five-year period from the beginning of 2020 through 2024. Travel activity plummeted, sparking a structural change in business travel through greater adoption of virtual meetings. Seen in this context, current oil consumption levels are relatively low and the impact of the pandemic has been beneficial for the climate. Moreover, the supply side’s ability to deliver has protected the global economy from a potentially huge price increase that would have been particularly devastating for the most deprived segments of the global population. Here we must acknowledge that the only practical way to end the oil age is to substitute oil in end-user applications, while the supply side will need to stand up and deliver.
The global natural gas industry has been on even more of a rollercoaster ride in recent years. Global demand in 2023 managed to recover to 2021 levels, but not more. Thus, gas demand going forward must be regarded as uncertain, particularly given that solar power generation has been growing faster than anyone expected. LNG markets seem set to be loose in coming years and LNG supply after 2030 appears abundant despite the recent move by President Joe Biden’s administration to halt new projects in the US.
Ultimately, we will still need oil and gas for decades to come, and driving the energy transition forward will require ‘all hands on deck’. While some companies and nations will invest significantly in renewables and cleantech, many developing countries may initially need to prioritise an ‘energy to all’ policy in their quest to eliminate energy poverty and raise the standard of living.
